The Office of the Insurance Commissioner for the state of Washington has adopted the proposed regulations of the new captive insurance law, effective 21 December 2021.
Originally published in August, the stakeholder draft established guidelines for the regulation and taxation of captive insurers in the state of Washington.
The law, passed in May, created a statutory framework for Washington-based private entities and public institutions of higher education to manage their risks through captive insurers, as well as authorising the Office of the Insurance Commissioner to incorporate the framework into the Washington Administrative Code.
The regulations set out the eligibility requirements for captive insurers and risk retention groups, as well as the processes and fees of registration and renewal.
Captive insurers must register with the commissioner within 120 days of 12 May 2021, or within 120 days after first issuing a policy that covers Washington risks, as well as pay a registration fee of US$2,500.
For risks located in Washington, captives are limited to provide coverage in property and casualty lines. Registered eligible captives are not permitted to offer stop-loss insurance or workers’ compensation that directly covers the worker, although a captive may indemnify a self-insured employer for their state workers’ compensation liability.
In addition, the adopted regulations determine that a captive is permitted to assume risks from other insurers as a reinsurer without the coverage limitations as stated above.
Finally, despite the recent result of an advisory ballot vote which saw Washington voters move to repeal the 2 per cent premium tax on captive insurers in the state, the rate of taxation will remain as set out in the original legislation.
